For-Profit Hospitals Cost More and Have Higher Administration Expenses

In this 1997 NEJM study, Drs. Steffie Woolhandler and David Himmelstein examine costs of care and administration at for-profit, nonprofit and public hospitals in the U.S. They found that administration consumes 34.0 percent of total costs at for-profit hospitals, 24.5 percent at nonprofit hospitals, and 22.9 percent at public hospitals. Compared with public hospitals, nonprofit hospitals were 23 percent costlier and for-profits were 34 percent costlier. Among acute care hospitals, for-profits had higher adjusted costs per discharge ($8,115) than did nonprofit ($7,490) or public ($6,507) hospitals. Much of this difference was due to higher administrative costs.